Rite Aid, one of the largest American pharmacy chains, announced on Dec. 21 that it will close 63 locations in an effort to reassess how many stores it needs to keep open nationwide to remain profitable.
The company made the announcement with its third-quarter earnings report, which reported a $36.1 million loss, saying that it expects to save about $25 million a year.
Rite Aid said the closures are part of an ongoing review and it has plans to close additional stores in the next several months in a long-term effort to reduce costs and boost profitability.
The company has approximately 2,500 stores across 19 states, with the projected closures amounting to just 2 percent of its store locations.
Its competitor CVS announced in November that it had plans to close 900 locations over the next few years as it moves away from its traditional retail model to focus more on providing health care services.
Rite Aid and other drugstore chains like CVS and Walgreens have been struggling after years of overexpansion.
The big pharmacy chains have been closing hundreds of stores across the country over the past few years, despite the pandemic and its variants increasing demand for vaccinations and tests across their customer base.
“The program’s primary focus is to reduce costs, drive improved profitability, and ensure that Rite Aid has a healthy foundation to grow from, with the right stores in the right locations,” Rite Aid said in a statement.
Rite Aid had administered nearly 1.1 million COVID-19 tests and 4 million COVID-19 vaccinations in the third quarter, well ahead of the firm’s estimated 1.8 million vaccinations.
Revenue from the vaccine shots and tests is estimated at $125.9 million.
The nation’s major drugstore chains have been readjusting their business models to compete with online pharmaceutical options, particularly from Amazon, which have impacted the pharmacy business.
Big retailers like Target have also expanded into the pharmacy market, putting further pressure on traditional drugstore chains.
Rite Aid has been changing its focus to allocate more space for personal and health care items with less on retail, and has built up its e-commerce business in recent years.
Competitors like CVS and Walgreens have been putting an effort into digital growth and turning stores into destinations that offer a range of health care services, from flu shots to diagnostic tests.
Rite Aid shares surged more than 16 percent in early trading.
As of the market close on Dec. 20, the stock had dropped roughly 22 percent year to date, putting Rite Aid’s market capitalization at nearly $692 million.